Carbon Footprint: Greening the Supply Chain Information Supplied By ECO Carbon Offsets
Carbon Footprint: Greening the Supply Chain The new carbon suite of legislation was introduced as at 1st July 2012 in Australia. Whilst this will initially impact on only 500 or so Australian businesses, namely those who are the major emitters of carbon, the legislation has been designed so that its effect will flow onto other businesses in the community. Here is how it works. Reporting: The top 500 companies will have a legislated annual obligation to report on the tonnage of their carbon emissions (commonly called the ‘Carbon Footprint’) of their business. (This is a measurement of total Greenhouse Gas (GHG) emissions which they produce: such as the amount of electricity they consume; amount of air travel by their staff; journeys to work by staff; size of car fleet which they operate; taxi usage; couriers; waste to landfill; etc.) Offsetting Emissions to Become Carbon Neutral: The next step in the legislative requirements is that those TOP 500 companies are now be required to offset those GHG carbon emissions, either through:
The purchase of Carbon Credit Certificates (at a price of $23 per tonne of emitted carbon [CO2e]) payable to the Federal Government. This payment does not actually result in any reduction of any pollution into the atmosphere, nor any absorption of the carbon in the atmosphere, but is simply a ‘Permit to Pollute”, or By an individual action program, which companies implement themselves, to reduce their emissions and then offset the balance of their unavoidable emissions through the purchase of Carbon Offsets from Carbon Offset providers (such as wind farms offsets or tree –based offsets derived from carbon farming). We ourselves, (ECO Carbon Offsets) are providers of the tree-based bio-sequestrated category of offsets. Ring-Fencing/ Quarantining Carbon Risk: One of the first things the Top 500 Companies will do in this whole process is to try and avoid “buying into the carbon emissions of their suppliers”. This will involve a three stage approach.
1. Carbon Accounting: Over the next year or so, we can expect that all suppliers to the ‘Top 500 Companies’ will be asked to supply a Statement of their Carbon Footprint Emissions to their clients. This is a necessary and legal requirement so that the ‘Top 500 Companies’ can calculate their TOTAL EMISSIONS by adding that proportion of the ‘in-put’ carbon emissions, accounted for by their suppliers, to their own ‘in-house’ produced emissions. As a hypothetical example, suppose ‘Supplier A’ has a carbon emission level of 150,000 tonnes pa and ‘Supplier A’ accounts for 5% to a particular
Top 500 Company’s business. Then that particular ‘Top 500 Company’ will be legally obliged to add 5% of Supplier A’s emissions to its own carbon footprint. In this hypothetical example, this will amount to 7,500 additional tonnes CO2e (150,000 tonnes x 5%) being added to their footprint. This will result in a cost penalty to that ‘Top 500 Company’ of an additional Carbon Fee of $172,500 (ie $23 x 7,500 tonnes). 2. Carbon Footprint – Suppliers: Those suppliers to that particular ‘Top 500 Company’, who can immediately supply the information regarding their own carbon emissions, will find themselves having a marketing advantage over any of their competitors who cannot supply information regarding their carbon footprint. This is because of the legal obligation on the Top 500 Companies to report on their total carbon emissions and also because of the fines imposed on any major company that under-reports its emissions. This is an immediate reason for suppliers to get a handle on their own carbon footprint. On the other hand, if a supply company cannot provide this basis information to their clients, then they run the risk that their competitors may be the ones chosen to supply goods or services to the client, rather than themselves. 3. Carbon Neutral – Suppliers: If there are several suppliers in a particular purchase category (eg trucks, vehicle fleet, accounting or consultancy services; legal services; tyres; paper; cement; petrol; stationery; couriers; etc) then any supplier, who can claim Carbon Neutral status, will have an additional inside track advantage and sell more because that particular ‘Top 500 Company’ will not have to add its supplier’s carbon emissions – for that category of inputs – to its Total Emissions. It will not have to do so because its supplier will have already offset the carbon emissions from the product category which it provides. Greening the Supply Chain: This overall process is known as “Greening the Supply Chain” and is one of the consequences anticipated by the new legislation. In other words, all of the companies involved in the supply chain to those companies captured by the Carbon Legislation will be required to report on (and reduce) their carbon emissions. Tree Based Positives: One of the advantages of tree-based biosequestered carbon offsets is that not only do trees actually absorb carbon dioxide from the atmosphere, is that tree based CO2 absorption processes also provide a wide range of additional environmental benefits, such as:
Wildlife Corridors: The linking of remnant patches of native woodlands which contribute to the re-establishment of wildlife corridors used by both bird and ground based native species to travel across the landscape. Soil Erosion: The prevention of water erosion because the woodlands reduce the flow of water and help its absorption into the soil. Salt Damage: A large tree can absorb 10 tonnes of water from the soil per day. This is a huge reservoir of water which would otherwise permeate to the surface and raise the water table in lands denuded of native vegetation. As a result, where there are areas of native vegetation destruction these areas are prone to suffer salt damage in which plants cannot grow. Marketing Promotion: Companies which contribute to actual tree-based native vegetation carbon absorption from the atmosphere will be entitled to use this information in their client newsletter and web sites showing how they have contributed to the growth of native vegetation and to the preservation of wildlife in the regions (such as the black tailed cockatoos; or the hairy nosed wombat). These sites can be identified by Google Map locations on the company’s Report & Accounts to Shareholders along with the associated benefits. Banking and Finance: Increasingly Banks are requesting that companies demonstrate that they have considered the implications of the carbon economy on their business as a pre-requisite to new loan approvals. Those companies which have not undertaken a carbon risk analysis are viewed as a higher risk by the banks.
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